Google App Challenging Fintech leaders.

As published on thetelegraph.co.uk, Sunday September 1, 2019.


Google’s decision to wipe “deceptive” and “exploitative” payday loans from the Android operating system has been met with criticism from short term lenders who slammed it for treading on the British government's toes.

Loans that require repayment in full in 60 days or less, also referred to as pay-cheque advances or short term loans will soon be banned, Google has warned app developers in an email.

It is the latest setback for the industry, which has long been criticised for extortionate interest rates. It will cut off crucial channels for online-only lenders, which three years ago were blacklisted from advertising on Google’s search engine along with guns and tobacco.

The move was criticised by the Consumer Finance Association (CFA), which represents short-term lenders.

Jason Wassell, chief executive of the CFA, said: “It is disappointing to see Google take the decision to ban short-term loan apps. It doesn’t seem to reflect the improved regulation and protection here in the UK. Nor does it recognise that demand for these products is high, and there is a need for short-term lending.”

“We are not surprised because it does reflect an approach where Google believes it knows best. We believe the UK Government and Financial Conduct Authority should make decisions on ‘bans’.”

American smartphone users will be shielded from apps that lend money with an annual percentage rate of 30pc or higher. However Britons still be shown apps with higher APR due to looser laws interest in the UK, provided that the rate is made explicit in the app’s metadata, Google said.

Predatory payday loans and loan shark apps have become commonplace on both Apple and Android app stores, with many promising consumers quick cash but little clarity on how much they will have to pay back.

Peer-to-peer lending, which has soared in popularity thanks to online marketplaces that place those in need of quick capital with those looking to make money, will also be prohibited. It is only recently that apps have become a popular way for consumers to get access to capital and have been a catalyst for the cryptocurrency boom, enjoying grey regulatory areas. But many have proved controversial.

One Silicon Valley, venture-backed startup Earnin has come under close scrutiny in recent months. The app allows users to withdraw up to $100 per day, but can change over time to upward of $500 or as low as $50. It asks, but does not require, people to tip “what you think is far for access to your earnings,” for the service, according to its website.

Adverts on Snapchat encourages tips equating to 10pc of the payout received. It claims this means it cannot be labelled a loan company and therefore does not need to ensure the customers have the ability to repay the loan, as required by US law. Earnin, which was launched in 2014 and is backed by $125m by renowned Silicon Valley investors Adreessen Horowitz and DST Global.

Two states in the US have opened investigations into the company to assess whether it has broken payday lending law. What seems like a small tip on a two-week $100 advance equates to high a high APR.

When asked whether it would be affected by Google's payday ban it said: "A loan usually has fees and or interests tacked on. We don't do that, so we aren't a loan".

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